Appeal No. EAT/250/01

EMPLOYMENT APPEAL TRIBUNAL
SITTING AT THE ROYAL COURTS OF JUSTICE,
STRAND, LONDON, WC2A 2LL

	At the Tribunal
	On 1 August 2001

Before
THE HONOURABLE MR JUSTICE LINDSAY (PRESIDENT) 
MS J DRAKE 
MR T C THOMAS CBE

MR A G SOTERIOU	APPELLANT

(1) ULTRACHEM (2) SOLVO LTD (3) ULTRACOLOUR LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

PRELIMINARY HEARING 

Revised

	APPEARANCES

For the Appellant	The Appellant in person	

MR JUSTICE LINDSAY (PRESIDENT)

1	We have before us by way of a preliminary hearing only and I have to emphasise that, there might have been a misunderstanding- the appeal of Mr A G Soteriou who has been here this morning in person.  

2	On 13 April 2000, he lodged an IT1 for unfair dismissal; of course if he wished to recover for unfair dismissal, amongst other factors, he would need to say that he was an employee.  The issue in particular, in this case, would be whether he was an employee or whether he was at all material times, self employed.  

3	In his Skeleton Argument he refers to a number of matters, but the only one which, in our view, comes within arguing distance of asserting that there may have been an arguable error of law on the Tribunal’s part is, in our view, at paragraph 11 of his Skeleton Argument, which relates to the issue of “illegality”.  We have heard Mr Soteriou, at some length, on other possibilities, but the only argument that seems to us appropriate to go forward is that as to “illegality”, and all other arguments are dismissed here and now.

4	So far as concerns illegality, the Tribunal’s Decision, and it was the Decision of the Tribunal at London Central under the chairmanship of Mr M S Rabin, was:

“The unanimous decision of the Tribunal is that the Applicant was an employee of the Respondents, but that the contract of employment was tainted with illegality so that he cannot rely upon it in bringing proceedings for unfair dismissal.”

His IT1 was for unfair dismissal, as we have mentioned, his status as at 17 January 2000, was held to be that of an employee; thus the Tribunal held:
“While it is impossible to identify a particular point of time when the relationship changed, we conclude that at some time from 1996 onwards, the relationship did change from self-employed to employed status”

and then in their paragraph 28 they say:
“However, having heard Mr Soteriou’s evidence and that of Mr Brinton before this Tribunal, we can only agree with Mr Everett”
- and he was an accountant that was consulted -
“that certainly by November 1998 and continuing thereafter until January 2000, Mr Soteriou should be regarded as an employee.”

5	There was nothing, it would seem, illegal about the contract of service, but it seems that it was being performed in a way calculated to hide its character and calculated to make it seem as if it was a contract for services.  Thus, Mr Soteriou rendered invoices (paragraph 9).  He invoiced the company under the heading “A G Services”, AGS being his initials (paragraph 11).  He was registered for VAT as A G Services (see paragraph 12), and he claimed to the DSS that he had never been an employee (paragraph 18).  He claimed that he had a management services contract (paragraph 18).  

6	He told downright untruths, so the Tribunal held, to the Contributions Agency (paragraph 28).  He was, held the Tribunal, a willing participant in the desire to retain his self employed status (paragraph 29).  Indeed, they held that he was the prime mover in ensuring that the self-employed status was preserved (paragraph 29).  
“The main blame lay with him”

said the Tribunal (paragraph 29) and he knowingly committed a fraud (paragraph 29).  The Tribunal concluded:
“We can only agree with Miss Eady”
and that was the Respondents’ Counsel below:-
“that Mr Soteriou cannot succeed in defeating the taint of illegality, and that having knowingly committed a fraud under a contract, in the way that Mr Soteriou has acknowledged, he cannot now come to this Tribunal to pursue a legal claim based on that contract.  The application is therefore refused in all respects.”

Now this is a difficult area.  The Employment Tribunal cited only one case, Hughcastle Catering Ltd v Akhmed & Another [1991] IRLR 473 in the Court of Appeal.  The subject is dealt with at some length in Harvey from A74 - A95 and it was fairly recently reviewed, albeit in the context of a sex discrimination claim, in Hall v Woolston Hall Leisure Ltd [2000] IRLR 78 which was reported in August 2000, but which was not, it seems, referred to the Employment Tribunal.  

7	The Soteriou case has some features which complicated it.  He was, held the Employment Tribunal, originally truly self-employed.  It was not possible to say precisely when he began to be truly employed; there was no finding as to when he believed, if ever he did, that he was employed and no longer self-employed, although he knew that there was an even chance that it was the case that he was employed (paragraph 29).  It would seem that he continued to account to the Revenue and to the Customs & Excise as if he was self-employed.  It would thus perhaps be arguable that although he had been mistaken for a period, he had not actually been fraudulent as he had continued to account to the Inland Revenue and Customs & Excise, or any other Government body that would be relevant, on the basis that had previously been the case, a basis which was not held by the Inland Revenue or the Customs & Excise not to be the case and which he was not held by the Tribunal to have known not to be the case.  Is it illegality, on finding that the basis on which you have accounted for tax and National Insurance contributions and in any other relevant way was false unless you knew it was false?  Is it illegality on finding that the basis is false and that another basis better suits you, then to assert that later better basis?  Or do the Tribunal’s findings that he had lied negate any argument that he did not know that he was accounting falsely?  

8	It is not an easy area and the cases draw really quite fine distinctions between one case and another.  We direct that the case is to go to a full hearing only on the question of whether the Employment Tribunal erred in law in its penultimate sentence, namely, “that having knowingly committed a fraud under a contract, in the way that Mr Soteriou has acknowledged, he cannot now come to this Tribunal to pursue a legal claim based on that contract”.  

9	That, it seems to us, does raise an arguable question of law.  It should be heard by a High Court judge at the Employment Appeal Tribunal and the directions are that Skeleton Arguments should be exchanged between the parties and given to the Employment Tribunal not less than fourteen days before the hearing.